The 33 State-owned entities targeted for mergers will spend a combined Sh118.54 billion on salaries and allowances in the current financial year, underscoring the huge recurrent savings if the reforms are enacted.
The Parliamentary Budget Office (PBO) says the Higher Education Loans Board (Helb) has the biggest recurrent budget among the 33 entities with a budget of Sh41.54 billion in the financial year to June 2026 followed by Kenya Rural Roads Authority (KeRRA) at Sh22.1 billion, Universities Fund (UF) at Sh17.26 billion and Kenya Urban Roads Authority (KURA) at Sh10.4 billion.
The 33 are to be collapsed into 15 entities as the government seeks to end an overlap in delivery of services besides reducing the financial burden of the loss-makers that perennially rely on bail outs.
Merging of the firms is also expected to trigger job cuts, pushing the Treasury to push for a budget for employees who will opt to retire under the voluntary exit option.
“Potential annual savings are likely to be attributed to reduced personnel costs, unified ICT systems, and consolidated procurement functions,” PBO says.
Plans to merge over 33 State-owned firms were first announced more than a decade ago under the previous administration of Uhuru Kenyatta. But the process was delayed, casting doubts on whether it would finally take off and ease the funding pressure on the Exchequer.
The reduced costs are critical, coming at a time the Treasury is grappling with mounting debt repayments that have significantly squeezed funds for development projects.
Helb will be merged with UF while KeRRA and KURA will be collapsed into one. The State also plans to merge Tourism Fund and Tourism Promotion Fund.
The three empowerment kitties, Uwezo Fund, Women Enterprise Fund, and Youth Enterprise Development Fund will be combined into one.
It remains unclear how much money the Treasury is seeking for the voluntary retirement scheme in the firms to be merged. The early exit is likely to target staff close to hitting the retirement age of 60 years.
But the PBO —the unit that advises lawmakers on budget and economic affairs— has also warned that the mergers are likely to face opposition from agencies pushing back against loss of autonomy, loss of highly technical and experienced staff, and may also face political backlash.
“Although the proposed mergers promise significant fiscal and operational benefits, they carry a number of potential risks that must be carefully managed,” the unit added.
The Cabinet approved the merger of the State-owned firms in January this year as part of the wider government plan to ease pressure on the Exchequer besides optimising service delivery.
Other firms which include the cash-rich Kenya Pipeline Company will be privatised with the government losing its majority shareholding and in turn raising billions of shillings to plug budget holes.
